• Home
  • Analytics
  • Market News
  • Fed being ‘held hostage’ by markets - Mohamed El-Erian

Market news

14 August 2019

Fed being ‘held hostage’ by markets - Mohamed El-Erian

The Federal Reserve is being “held hostage by markets” and will be forced to make two interest rate cuts before the end of the year, according to Mohamed El-Erian, the chief economic adviser to Allianz.

El-Erian said the Fed will “have no choice” but to drop rates to as low as 1.75% over the next five months to alleviate fears that trade tensions and slowing global growth will hurt the US economy.

“Even though further cuts are not justified by traditional economic metrics, the Fed will have no choice but to reduce rates. The markets are holding them hostage right now,” said El-Erian.

“The cuts will be made for negative reasons, not positive ones. The Fed is afraid of the market’s reaction if it doesn’t act,” he said.

The US central bank reduced rates last month for the first time in 11 years, cutting them by 25 basis points. 

El-Erian said: “This is not yet the start of a long series of cuts. We are not looking at six or seven straight reductions. The US economy is still in a good place, and for a recession to happen over the next 12 months would require either a policy mistake or a big market accident.”

Market Focus
  • UK retail sales rose sharply in July
  • Swiss producer and import price index fell by 0.1% in July
  • Japan financial minister Aso says he hopes markets will calm down
  • China's new home prices firm in July - NBS

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Forex Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
37 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2018 TeleTrade-DJ International Consulting Ltd

TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. If you disagree, you may change your browser settings at any time. Read more.

TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.